Court rules Bronx nursing home taxes overvalued

In a ruling that could cost the city millions in tax revenues, a state Supreme Court judge said a Bronx nursing home will receive about $3.4 million in property tax reductions because its income was wrongly valued based on market-rate rents.

Underbruckner Realty, which owns the Bronx Center for Rehabilitation and Health Care, located at 1010 Underhill Avenue, challenged an initial tax ruling in 2007. In that lawsuit, Underbruckner argued that the property values should be based on annual Medicaid reimbursements rather than market-rate rents, which are used for traditional commercial buildings, including office properties and shopping malls.

“In this situation and a lot of situations with nursing homes when you have Medicaid patients, you get reimbursed from the state based on certain construction costs,” said attorney Roy Sparber, who represented the nursing home. “That’s not really market rent.”

City officials said they plan to appeal the November ruling.

“We respectfully disagree with the court’s conclusion — which splits the difference between the city’s current assessments and petitioners requested assessments,” said Amy Rosenfeld, senior counsel, tax and bankruptcy litigation division in the New York City Law Department.

The case centered on the methods used to calculate real estate taxes for the nursing home, which has 200 beds, covers 64,680 square feet and receives about 90 percent of its revenue from Medicaid reimbursements.

Underbruckner acquired the Bronx nursing home in 1998, according to city records. The firm received an $11.8 million loan to refinance the property in 2006 from Greystone Servicing.

Lawyers for the nursing home argued that the city cannot assess property taxes for a nursing home based on market-rate rents, but must use Medicaid reimbursements, which are the major source of income for most nursing homes and senior care facilities in New York City.

However, a legal source familiar with the case noted that the judge split the difference between the city and nursing home’s estimated assessment, and did not base the ruling on the Medicaid argument.

Sparber said the ruling could have an impact on adult homes for senior citizens because they derive income in almost the same way nursing homes do.